Deputy Commissioner of Taxation v Issa

This case involves two narrow questions about the Taxation Administration Act 1953 (Cth) and whether the Commissioner of Taxation posted three notices to the Defendant.

The first question that is raised is a factual question about whether the Commissioner has proved that the notices were posted. Assuming proof of posting, the second question is whether the notices were posted by the Commissioner in circumstances where a third party service provider was involved in the process without a formal delegation from the Commissioner and where there is a general authorisation to public servants that does not include the posting of notices under the relevant provision of the Statute.

The background context may be stated briefly. Division 269 of Sch 1 of the Taxation Administration Act 1953 provides for the imposition of penalties on directors of non-complying companies. The purpose of Div 269 is to ensure that a company either meets its payment obligations, in this case to pay assessed net amounts in accordance with A New Tax System (Goods and Services Tax) Act 1999 (Cth), or goes promptly into external administration of one or other of three forms specified in the statute.

Under ss 269-10(1) and 269-15(1), on the day a tax period ends, a director comes under an obligation to cause the company to comply with its obligation to pay the net amounts by the due date. Section 269-20 provides that the director is liable to pay a penalty if the company does not comply with its obligations. The amount of the penalty is equal to the unpaid amount of the company's liability under its own obligations.

The Commissioner may sue for the penalty but there is a temporal precondition to doing so. Section 269-25 provides as follows:

Both parties refer to a notice under section 269-25(1) as a “Director's Penalty Notice”.

The Director's Penalty Notice does not itself impose the penalty on the director. The penalty is imposed by s 269-20. The Director's Penalty Notice lifts the bar to the Commissioner commencing proceedings against the director to recover the penalty.

Amongst other things, the Director's Penalty Notice must explain the main circumstances in which the penalty will be remitted: s 269-25(2)(c). Those circumstances are set out in s 269-30 and are essentially that, within 21 days, the company's liabilities are discharged or specified steps are taken to have the company wound up, restructured or placed in administration. There are qualifications.

Given its prescribed contents and the time limits that operate by reference to it, it may be accepted that the giving of the Director's Penalty Notice is an important matter.

The precondition to commencing proceedings in s 269-25(1) is that the Commissioner "give" the Director's Penalty Notice.

Under s 269-25(4) the Director's Penalty Notice is taken to be given "at the time the Commissioner leaves or posts it".

Section 269-25(4) is specified to be "despite section 29 of the Acts Interpretation Act 1901”. Section 29 provides:

Section 29 addresses two matters, namely, how a document is to be served by post and when the document is taken to be served. In its terms, s 269-25(4) is confined to the second matter. The fact that s 269-25(4) applies “despite section 29” does not exclude the application of s 29 to the first matter. By virtue of s 29(1) the Commissioner will be taken to have effected the posting of a Director's Penalty Notice under s 269-25(1) by properly addressing, prepaying and posting it. As will be seen, this is consistent with the common law position.

As for the address to which the Commissioner must post the Director's Penalty Notice, at the time relevant to this case s 269-50 provided:

Section 269-52 provides for multiple copies of a Director’s Penalty Notice to be given where the director has a registered tax agent.

Within that context there is no dispute about the essential facts in this case other than in relation to posting.

At times relevant to this case the Defendant was the director of three companies: SEEKY IP PTY LTD, GO CHECK ID PTY LTD and SPORTS FOYER IP PTY LTD. Each company was assessed by the Commissioner to pay a net amount which when combined total around $2 million. The details of which are not currently relevant. There is no dispute that by reason of the assessment of the net amounts the Defendant was obliged to cause the relevant company to pay by the due date, he did not, that he subsequently became liable for penalties for the same amounts and that that liability has not been discharged by the director.

The Commissioner commenced these proceedings on 18 April 2024 by filing a Statement of Claim in which the Commissioner alleges the matters necessary to establish the underlying liability of the three companies. He further pleads the obligations imposed on the Defendant under s 269-15, non-compliance with those obligations and the resultant liability for penalties under s 269-20.

The Commissioner does not expressly plead the giving of the Director's Penalty Notices to the Defendant. However, on 2 June 2025 the Defendant filed an Amended Defence in which he denies liability by reference to positive allegations that he did not receive any Director Penalty Notices and does not admit that the Commissioner “gave” them to him.

He further says that if Director Penalty Notices were posted to him, they were not posted by the Commissioner but by a third-party service provider called Computershare Communication Services Pty Ltd, which I will refer to as CCS.

The first question is whether the Director Penalty Notices were posted. It is a question of fact. The relevant word used in s 269-25(4) is "post". I have set out above s 29 of the Acts Interpretation Act 1901 (Cth) which refers to properly addressing, prepaying and "posting the document as a letter". In this respect s 29 conforms to the common law about what is required to establish service by post. Justice Digby in Guss v Australian Tax Office (2017) 53 VR 180; [2017] VSC 396 said at 193; [75]:

I find that the Commissioner has adduced evidence which proves that the three Director's Penalty Notices which concern the Defendant were correctly addressed, pre-paid and lodged with Australia Post on 29 August 2023.

As would be expected for a large organisation like the Australian Tax Office, its postal system is highly automated. Proof of postage has been achieved by relevant officers of the ATO and the external service provider (CCS) who are familiar with the ATO's and CCS’s systems describing the process applicable to the issues in this case.

There is the evidence of an Officer of the ATO who is employed in the Bulk Print Management team of the ATO. His duties include overseeing the bulk personalised mail for the ATO. He states in his affidavit that he is familiar with the systems and processes employed by the ATO to print and post bulk personalised mail through external contractors. His evidence demonstrates, and ultimately there was no dispute about this, that at about 6pm each day the ATO's Digital Outbound Team batch up numerous letters to be posted by creating a print-ready correspondence file which is emailed to CCS. I will refer to the print-ready correspondence file as the PS File to be consistent with the evidence in the Officer’s affidavit.

Having regard to the final submissions and the evidence in the Officer's affidavit, there is no residual controversy that on 28 August 2023 the Bulk Print Management team emailed to CCS a PS File which contained, amongst other letters, the three Director's Penalty Notices upon which the Deputy Tax Commissioner sues in these proceedings. It is not therefore necessary to go through the detail. The Officer gives evidence of the receipt of an acknowledgement from CCS and the other documents which would in the ordinary course be generated were the ATO's automated system properly to have been implemented on 28 and 29 August 2023.

The other side of the system-coin relates to the systems used by CCS upon receipt from the ATO. The Commissioner adduced evidence from a Client Delivery Consultant who has been employed by CCS for the last 11 years. The witness described how CCS is an Australia Post-accredited mail house under an Australia Post Bulk Mail Partnership Program and that CCS has held that accreditation with Australia Post since 2005. The witness further explained that CCS is a provider of bulk printing services for the Australian Taxation Office. Those services include printing and posting Director Penalty Notices issued by the ATO. Other bulk printing and mailing services provided by CCS to the ATO include printing and mailing other items of correspondence and activity statement forms.

The Client Delivery Consultant is the day-to-day operational contact for the ATO for CCS. The witness described the systems used by CCS first for the receipt of the PS File from the ATO, the issuing of an acknowledgement, the printing of the contents of the PS File and the processing of that printed material by the Mailing Machine. Again, the evidence addresses the automation of the system and includes evidence about what reports would be generated in circumstances where the system had not been implemented regularly in any particular case, including the case which concerns these proceedings. The witness said that there is no evidence that the process was not undertaken regularly on 28 and 29 August 2023. The witness' evidence was explored in cross-examination.

The focused submission finally made by the Defendant is that the Court cannot be satisfied on the balance of probabilities that the two-page Director Penalty Notices were correctly processed by the Mailing Machine so that the Australia Post barcode and the address block were visible through the envelope window with the consequence that it is doubtful they were properly dispatched by Australia Post to the Defendant.

It does not really matter whether the Director Penalty Notices were dispatched or not because both under s 29 of the Acts Interpretation Act 1901 and at common law, in order for a letter to be posted it must be properly addressed. If the Defendant's contention is accepted, a deficiency in the alignment of the address block and the absence of the Australia Post barcode through the window of the envelope would mean that the three Director’s Penalty Notices were not properly addressed. Hence, the Commissioner has not proved that they were posted even if they were physically dispatched.

I accept the Defendant's submission that the witness from CCS gave varying responses to questions in cross-examination about the relevance of a particular barcode in the left hand margin of the Director's Penalty Notice to the proper performance of the function of the Mailing Machine. The Defendant points out that on some copies of the Director's Penalty Notices which are in evidence the barcode is accompanied by two letters of the alphabet, "L" in one case, and "M" in another, which may suggest that the pages were inserted into the envelope by the Mailing Machine in the wrong order, giving rise to the doubt for which the Defendant contends.

It is correct that, in cross-examination, the witness from CCS did say that the Defendant's interpretation of the barcodes was correct so far as it went, but when questioned about the interaction between that barcode and the Mailing Machine, the witness from CCS was consistent in her evidence that the Mailing Machine responded not to that particular barcode, but to another barcode which appeared above the Australia Post barcode above the address block. The witness referred to this particular barcode as the "T bar barcode”. The T bar barcode may not actually be a conventional barcode. It has two bars which, together, depict a T on its side followed by a string of numerals. In any event, the witness said clearly that it was the T bar barcode which communicated with the Mailing Machine about the sequence in which pages were to be placed in envelopes, and in the evidence before the Court the front page of the Director Penalty Notices contains the numeral 1 in the T bar code.

I accept that the witness' evidence on this issue was inconsistent. However, this is not a case where the witness was not giving honest evidence. To my observation, she listened carefully to the questions and answered them to the best of her ability and I accept her evidence concerning what information on the pages of the Director Penalty Notices communicated with the Mailing Machine.

Further having regard to the evidence as a whole, the best guide to the operation of the Mailing Machine is the clear evidence the witness gave that, if the pages were placed incorrectly into the envelope so that neither the address block nor the Australia Post barcode was visible through the window, the machine would "stop". The witness said it twice and was emphatic. She also made clear that, had that happened, a record would have been made and, having reviewed the relevant records, there is no record of that occurring at any time relevant to this case.

This is a question that needs to be resolved on the balance of probabilities. Having regard to the evidence as a whole, including the regularity of the submission of the PS File to CCS on 28 August 2023, the generation of all the usual acknowledgements and receipts, CCS issuing the Supply Acceptance Certificate and the approval thereof by the ATO, including the payment contemplated by that document by the ATO to CCS and the subsequent interrogation of the Australia Post E-LMS system by reference to the relevant job production number, I am satisfied on the balance of probabilities that the three Director's Penalty Notices were posted to the Defendant in properly addressed envelopes on 29 August 2023.

In reaching that conclusion, I do not consider it necessary to decide whether an inference to that effect may more comfortably be drawn in circumstances where the Defendant has not adduced evidence that the three Director's Penalty Notices were not actually received by him. Receipt of the Director's Penalty Notices is not relevant in the sense that the bar to commencing proceedings is raised merely by the posting of the Director’s Penalty Notices, not whether they are subsequently received: s 269-25(1). In those circumstances, I do not express a view about whether an adverse inference is available from the fact the Defendant did not give that evidence.

In any event, as I have said, I am satisfied on the balance of probabilities that, as a matter of fact, the three Director's Penalty Notices were posted on 29 August 2023 to the Defendant.

The next question that then arises is whether the Director’s Penalty Notices were posted by the Commissioner. Subsections 269-25(1) and (4) both refer to the Commissioner giving the Director's Penalty Notice. Section 296-50 provides that the Commissioner may give the notice by posting it. As will be apparent from the description above of the evidence about the posting of the three Director's Penalty Notices to the Defendant on 29 August 2025, the physical steps of printing the Director's Penalty Notices, placing them in envelopes and putting the envelopes in Australia Post Unit Loading Devices located on the premises of CCS for collection by Australia Post were performed by CCS. Indeed, when the Australia Post truck arrived it was a CCS forklift which lifted up the Unit Loading Device and placed it on the truck.

For the purposes of considering the role played by CCS, the following further facts have been agreed by the parties under s 191(1) of the Evidence Act 1995 (NSW):

The Defendant submits that by virtue of the role played by CCS, the three Director's Penalty Notices were posted by CCS and not by the Commissioner.

The Defendant’s submission is developed first by a detailed description of the statutory office of the Commissioner of Taxation and the Australian Taxation Office as a statutory agency for the purpose of the Public Service Act 1999 (Cth). Section 4A(1) of the Taxation Administration Act 1953 provides:

The Defendant points out that persons engaged under the Public Service Act 1999 must uphold Australian Public Service (APS) values, which include openness, trustworthiness and acting with integrity, compliance with Australian law and not engaging in false and misleading conduct. It also includes an obligation to avoid conflicts of interest. The submission is made in support of the proposition that the statute intends posting to be performed by the Commissioner personally, by his formal delegates or by ATO staff.

However, the Defendant was not able to point to any aspect of the APS Values, or the APS Code of Conduct, which were particularly pertinent to the performance of the function of printing the Director's Penalty Notices, placing them in envelopes and posting those envelopes. Compliance with all Australian law and not engaging in false and misleading conduct are matters which must be adhered to, not just by Australian public servants. Two matters only were suggested. First, the prospect that CCS would not be prohibited from engaging in misleading and deceptive conduct when communicating with a taxpayer about whether a notice had been posted because such conduct would not properly be characterised as being engaged in in trade or commerce and thereby outside the prohibition in s 18 of the Australian Consumer Law. I think that doubtful. The second matter was that the Australian public service commitment to “openness” might mean an officer of the department might respond differently in response to an inquiry by a taxpayer about whether a Director's Penalty Notice had been posted.

I do not consider that these examples in the specifics or the provisions of the Code of Conduct or the APS values generally demonstrate that there is some particular attribute of Officers of the ATO which renders them particularly equipped to perform the functions of printing Director's Penalty Notices, placing them in envelopes and posting them. I consider that any necessary requirements for the efficacy of those functions to be formed by a third-party contractor are readily capable of being achieved by contractual obligation. Nor do I consider that the fact that Officers of the ATO would be liable for termination of their employment if they departed from the APS values or the APS Code of Conduct means that they are peculiarly placed to perform the postal function.

Against that background, the Defendant points out that ss 269-25 and s 269-50 refer to posting by the Commissioner. The Defendant submits that it is a question of statutory construction as to whether those provisions require the Commissioner personally to carry out that function or by an authorised delegate under s 8 and, if the Commissioner is able to authorise someone else to carry out that function, whether that person must be an officer of the Australian Tax Office.

It is to be observed that ss 269-25 and 269-50, when referring to a function being performed by the Commissioner, are the same as almost all the other provisions in Sch 1 of the Taxation Administration Act 1953 by which a multitude of powers and functions are given to the Commissioner. The Defendant accepts that it would be impossible for the Commissioner personally to exercise all the powers and functions in Sch 1. The Defendant further accepts that the Commissioner may authorise an Officer of the ATO to perform administrative functions on his behalf, and that is so even though s 8 gives the Commissioner a broad power formally to delegate his functions and power, which delegation has in fact occurred. The Defendant is right to accept these matters as they are consistent with the majority judgment of the High Court in O'Reilly v State Bank of Victoria Commissioners (1983) 153 CLR 1; [1983] HCA 47, where Gibbs CJ said 11-13; [6]-[7]:

Justice Wilson in the same case said at 30; [6]:

Notwithstanding these concessions, the Defendant submits that the printing, enveloping and posting of the Director's Penalty Notices by CCS was not posting by the Commissioner. The essential proposition is that the Commissioner may not authorise a person other than an Officer of the Australian Public Service to perform this administrative function.

Whilst the statements in O'Reilly, uttered as they were in 1983, were expressed in terms of administrative assistance from Officers of the department (cf Wilson J: “servants or agents”), the worker’s employment within the public service is not particularly pertinent to the reasoning beyond the importance of the accountability of a minister (cf the Commissioner). The reasoning in O’Reilly more pertinently reflects the modern reality of service provision by a big organisation like the ATO.

Joosse v Deputy Commissioner of Taxation [2002] VSCA 48 was a case which involved service of a Director's Penalty Notice, albeit under the provisions of the Income Tax Assessment Act 1936 (Cth). The County Court of Victoria had rejected the director's application to set aside a default judgment. On an application for leave to appeal, the director argued that the person who placed the notice in his letter box was not a delegate of the Commission and therefore service had not occurred. The argument was rejected by Batt and Buchanan JJA at [14]:

The Defendant submitted that the Joosse case is distinguishable because the person who placed the notice in the letter box was an officer of tax office.

Pattenden v Federal Commission of Taxation (2008) 175 FCR 1; [2008] FCA 1590 was a case where a departure prohibition order was made by the appropriate delegate of the Commissioner and then served on the taxpayer. The taxpayer brought proceedings to challenge the making of the order but not there service of it on him. Justice Logan nonetheless said at 11; [44]:

Pascoe v Minister for Land Information [2024] NZCA 557 was a case where the Public Works Act 1981 specified a number of preconditions to the Minister acquiring private land for public works. Amongst other things, the Minister was required first to serve the landowner with a notice, to lodge a notice with the Registrar-General and to “make every endeavour to negotiate in good faith with the owner in an attempt to reach an agreement for the acquisition of the land”. The Court of Appeal held that the Minister was permitted to appoint a private service provider to perform each of these functions, including to negotiate on the Minister's behalf so long as the Minister retained ultimate responsibility for the negotiation. At [108]-[111] the Court said:

In relation to service of a notice on the landowner, the Court said at [106]:

In this case, there can be no question that printing, enveloping and posting are administrative functions. They do not involve any exercise of discretion, and they do not call for the exercise of any judgment.

I accept the Defendant's submission that this is ultimately a question of construction. However, there is no basis to conclude that the performance of the Commissioner's powers or functions to post Director's Penalty Notices under s 269-25(1) is intended to be undertaken in the narrow way for which the Defendant contends. I have addressed above the question of the statute reflecting a policy requiring certain matters to be performed by public servants. Posting a Director's Penalty Notice may give rise to a controversy as to the fact and as to the date. It is important that the Commissioner is able to adduce evidence about those matters, which may be facilitated by Director’s Penalty Notices being posted by an Officer of the department with access to departmental records. However, as this case itself demonstrates, there is no reason why the adequate generation and retention of records cannot be achieved when a third‑party service provider is used.

As a further contention, the Defendant submits that the fact that there is a general authorisation of the Commissioners functions to public servants indicates that there is no authorisation to CCS to perform the particular functions it has undertaken in this case. I do not accept that submission. The evidence establishes that the ATO has for 15 years transmitted soft copies of bulk communications to be printed and posted by CCS. I draw the inference, in the absence of any evidence to the contrary, that there is no complaint on the part of the Commissioner about CCS carrying out such functions at any time. The officer called from CCS has made apparent how important it is to CCS to ensure that it performs its obligations to the ATO. Its own commercial interests demand it. The contention that CCS was somehow unauthorised to post the Director Penalty Notices to the Defendant lacks reality.

Further, the Commissioner has chosen to bring these proceedings in which he sues upon the three Directors' Penalty Notices in question and, in the face of that factual reality, it cannot be gainsaid that the Commissioner regards CCS as properly authorised to do exactly what the evidence shows it did in this case.

The Defendant further relies on cl 35.12 in the contract between the ATO and CCS, which addresses the question of agency. That provision has no application to the issues before the Court in these proceedings. The first part of that clause is directed to CCS holding itself out to third parties as an agent of the ATO. The second part says that there is no relationship of agency. The clause is directed to CCS seeking to bind the ATO to any obligation to a third party and vice versa. It does not undermine or detract in any way from the specific provisions of a service provision contract under which certain services are to be provided by the service provider.

I do not consider that the conclusion I have reached is proscribed by s 4A, which is set out above. Section 4A is directed to “[t]he staff necessary to assist the Commissioner”. That reference does not apply to the Commissioner being assisted by the acquisition of services from an external service provider where the services are of the nature of printing documents, placing them in envelopes and posting them.

Having found that the Director's Penalty Notices were posted on 29 August 2025, I am satisfied that they were posted by the Commissioner for the purposes of s 269-25(1). Having regard to the terms of s 269-25(4), it does not matter that they were not actually received by the Defendant.

In those circumstances, I will grant the relief sought by the Plaintiff in the Statement of Claim and make the following orders: